IN THE UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF OHIO

EASTERN DIVISION

MOMENTIVE SPEC. CHEM., INC. et al., 

Plaintiffs Case No. 2:11-cv-00583

v. Judge Graham

CHARTIS SPEC. INS. CO., et al., Magistrate Judge Deavers

Defendants.

ORDER

This matter is before the court on the Fed. R. 12(b)(6) motion to dismiss of defendant

Chartis Speciality Insurance Co. (Chartis).

I. Facts

Plaintiff Momentive Speciality Chemicals, Inc. (Momentive)1

 is a New Jersey

corporation with its principal place of business in Columbus, Ohio. Plaintiff Momentive

Quimica de Brasil Ltda (Momentive Brazil) is a Brazilian limited liability company with its

principal place of business in Brazil2. Momentive Brazil is a wholly owned subsidiary of

Momentive. The moving defendant, Chartis is an insurance company organized under the laws

of the State of Illinois with its principal place of business in New York, New York. Codefendants are Willis North America, Inc. (Willis), a Delaware insurance brokerage company

with its principal place of business in Tennessee, and Aon Risk Services Northeast, Inc. (Aon,), a

New York insurance brokerage company with its principal place of business in Chicago, Illinois. 

1 Momentive was formerly known as Hexion Specialty Chemicals, Inc. and Borden

Chemical, Inc. 

2 Momentive Brazil does not do business in the United States but submits to the

jurisdiction of the court solely to resolve the issues presented in this case. 

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This is a dispute over insurance coverage. The incident which gave rise to the need for

insurance occurred on November 14, 2004, when the Chliean tanker ship Vicuna, carrying

15,000 tons of methanol (one-third of which had been ordered by Momentive Brazil), exploded

in Paraguana Bay, Brazil (the “Vicuna Accident”). The explosion resulted in a spillage of an

estimated 291,000 liters of fuel oil into Paranagua Bay. As a result of the fuel spill, Momentive

has been faced with claims for damages from fishermen who allege that their livelihood was

affected by the fuel spill as well as claims from an environmental group alleging that the fuel

spill wreaked havoc on wildlife in Paranagua Bay. In addition, Momentive has faced fines

imposed by the Brazilian environmental agency (the Environmental Institute of Parana – State of

Parana Environmental Agency “IAP”). 

Prior to the Vicuna Accident, Momentive had entered into two insurance brokerage

agreements. In May of 2000, Momentive contracted with Willis as its worldwide insurance

broker for itself and its subsidiaries, including Momentive Brazil. By written agreement, Willis

was obligated (among other things) to assist and counsel Momentive on all risk management and

insurance issues and to assume responsibility for handling claim and coverage issues with

Momentive’s various insurers. (Willis Agreement). Pursuant to the Willis Agreement, Willis

also agreed to indemnify Momentive for any losses arising out of the negligent performance of

services under the contract. For the period of July 1, 2004 to July 1, 2005 Willis placed a ACE

2004-2005 Global GL Policy and a Steadfast 2004-2005 Global Excess GL Policy. In August,

2004, Aon was appointed as Momentive’s exclusive insurance representative except for policies

effective July 1, 2004 which had been placed by Willis. Pursuant to written agreement, Aon’s

duties included assisting on insurance claim and coverage issues. Aon placed, among other

things, the 2005-2010 Chartis Pollution Policy (Pollution Policy). The complaint is silent as to

whether Aon notified Chartis of the Vicuna Accident at the time it procured the Pollution Policy.

On the day after the Vicuna Accident, Momentive Brazil’s Manger of the Comptroller

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Department, Tania Trigo informed one of Willis’ representatives of the Vicuna accident by

email. A Willis representative confirmed that Willis would provide notice “to the Insurance

Co.” (doc. 2 ¶66). Approximately three weeks later, Janice Hackett, a Willis representative in

Ohio had further discussions about the accident with Momentive’s Director of Risk

Management, Richard L. Shock. Despite being on notice of the accident, Willis apparently

failed to notify any insurance companies of the accident, including Chartis. Momentive also

apparently failed to notify Chartis at that time. Plaintiff also alleges that Aon representatives

were also notified of the Vicuna accident shortly after it occurred. Beginning in 2005 and

proceeding thereafter, Momentive requested Aon’s assistance in determining insurance coverage

available to cover the Vicuna accident. It is unclear from the complaint who notified Chartis of

the accident, but this notice did not happen until sometime in early January 2010. 

On April 25, 2011, Chartis filed a complaint for declaratory judgment against Momentive

in the Federal District Court for the Southern District of New York. Chartis sought a declaration

that the policy did not provide coverage for the Vicuna accident. That case was voluntarily

dismissed by Chartis. On July 1, 2011, Momentive filed the instant action for declaratory

judgment.

II. Legal Standard

This matter is before the court on the motion of defendant to dismiss the complaint

pursuant to Fed. R. Civ. P. 12(b)(6) for failure to state a claim for which relief may be granted. 

In ruling on a motion to dismiss under Rule 12(b)(6), the court must construe the complaint in a

light most favorable to the plaintiff, accept all well-pleaded allegations in the complaint as true,

and determine whether plaintiff undoubtedly can prove no set of facts in support of those

allegations that would entitle him to relief. Erickson v. Pardus, 551 U.S. 89, 94 (2007); Bishop

v. Lucent Technologies, Inc., 520 F.3d 516, 519 (6th Cir. 2008); Harbin-Bey v. Rutter, 420 F.3d

571, 575 (6th Cir. 2005). To survive a motion to dismiss, the “complaint must contain either

direct or inferential allegations with respect to all material elements necessary to sustain a

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recovery under some viable legal theory.” Mezibov v. Allen, 411 F.3d 712, 716 (6th Cir. 2005). 

Conclusory allegations or legal conclusions masquerading as factual allegations will not suffice. 

Id.

While the complaint need not contain detailed factual allegations, the “[f]actual

allegations must be enough to raise the claimed right to relief above the speculative level,” Bell

Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007), and must create a reasonable expectation

that discovery will reveal evidence to support the claim. Campbell v. PMI Food Equipment

Group, Inc., 509 F.3d 776, 780 (6th Cir. 2007). A complaint must contain facts sufficient to

“state a claim to relief that is plausible on its face.” Twombly, 550 U.S. at 570. “The

plausibility standard is not akin to a ‘probability requirement,’ but it asks for more than a sheer

possibility that a defendant has acted unlawfully.” Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct.

1937, 1949 (2009). Where a complaint pleads facts that are merely consistent with a defendant’s

liability, it stops short of the line between possibility and plausibility of entitlement to relief. Id. 

Determining whether a complaint states a plausible claim for relief is “a context-specific task

that requires the reviewing court to draw on its judicial experience and common sense.” Id. at

1950. Where the facts pleaded do not permit the court to infer more than the mere possibility of

misconduct, the complaint has not shown that the pleader is entitled to relief as required under

Fed.R.Civ.P. 8(a)(2). Ibid.

Plaintiff must provide “more than labels and conclusions, and a formulaic recitation of

the elements of a cause of action will not do.” Twombly, 550 U.S. at 555; see also Ashcroft, 129

S.Ct. at 1949 (“Threadbare recitals of the elements of a cause of action, supported by mere

conclusory statements, do not suffice.”); Association of Cleveland Fire Fighters v. City of

Cleveland, Ohio, 502 F.3d 545, 548 (6th Cir. 2007).

III. Legal Analysis

Defendant asserts that dismissal is proper because the plaintiff’s complaint clearly

establishes that the Vicuna Accident is not covered by the Pollution Policy due to plaintiffs’

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prior knowledge of the pollution condition. 

The Chartis Pollution Policy3

 provides for coverage of pre-existing conditions and states

in pertinent part:

To pay on behalf of Insured, Loss that the Insured is legally obligated to pay as a result

of Claims for Clean-Up Costs resulting from Pollution Conditions on or under the

Insured Property that commenced prior to the Continuity Date, provided such claims

are first made against the Insured and reported to the Company in writing during the

Policy Period, or during the Extended Reporting Period if applicable. 

Pollution Conditions is defined as:

[T]he discharge, dispersal, release or escape of any solid, liquid, gaseous or thermal

irritant or contaminant, including, but not limited to, smoke, vapors, soot, fumes, acids,

alkalis, toxic chemicals, medical waste and waste materials into or upon land, or any

structure on land, the atmosphere or any watercourse or body of water, including

groundwater, provided such conditions are not naturally present in the environment in the

amounts or concentrations discovered.

The Policy also contains exclusions, and provides that the “Policy does not apply to Clean-Up

Costs, Claims, Loss, Actual Loss, Extra Expense, or loss of Rental Value:

* * *

I. Arising from Pollution Conditions existing prior to the Inception Date and

known by a Responsible Insured and not disclosed in the application for this

Policy, or any previous policy for which this Policy is a renewal thereof. 

The inception date of the policy was July 1, 2005, approximately seven and a half months after

the Vicuna Accident.

The interpretation of an insurance contract and its exclusions is a question of law. 

Gencorp, Inc. v. American Int'l Underwriters, 178 F.3d 804, 817 (6th Cir. 1999). An exclusion

clause must be carefully expressed and with operative terms clearly defined. See, St. Paul Fire

3

The policy was not attached to the complaint but was provided by defendant Chartis as

part of its Motion to Dismiss. The Pollution Policy is central to the plaintiffs’ complaint and

claims and is therefore properly considered by the court. See Blessing v. USW, 244 Fed. Appx.

614, 620 fn. 1 (6th Cir. 2007)(citing Greenberg v. Life Ins. Co. of Virginia, 177 F.3d 507, 514

(6th Cir. 1999)). 

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& Marine Ins. Co. v. Powell-Walton-Milward, Inc., 20 F.3d 690, 693 (6th Cir. 1994). When the

words of the contract are explicit and do not lead to absurd consequences, no further

interpretation may be made into the parties’ intent. See e.g., Safeco Ins. Co. of Am. v. White,

913 N.E. 2d 426, 430, 122 Ohio St. 3d 562, 566-67 (Ohio 2009) (the court looks at the plain and

ordinary meaning of the language used in the policy to determine the intent of the parties to the

insurance contract). However, if there is ambiguity in the contract, the ambiguous provision

must be construed against the insurer. Id. Exclusionary clauses are strictly construed against the

insurer and if an exclusion is subject to more than one interpretation, then the interpretation

favoring coverage applies. See, St. Paul Fire & Marine Ins. Co. v. Powell-Walton-Milward, Inc.,

20 F.3d 690, 693 (6th Cir. 1994). The insurer “bears the burden of proving the applicability of

an exclusion in its policy.” Baliey PVS Oxide LLC v. Plas-Tank Indus., No. 3:02CV7363, 2003

U.S. Dist. LEXIS 16598 (N.D. Ohio Sept. 4, 2003)(citing Cont'l Ins. Co. v. Louis Marx Co., 64

Ohio St. 2d 399, 415 N.E.2d 315, 317 (Ohio 1980)). 

The defendant asserts that the pre-existing conditions exclusion is applicable because

plaintiff admits that at least two of its employees were aware of the Vicuna accident and

pollution conditions prior to the inception of the Chartis policy. Defendant further asserts that

those employees were “responsible insureds” as that term is defined in the policy. Because

plaintiff’s responsible insureds were aware of the pollution condition, defendant asserts that it

would only be required to cover the pollution condition if plaintiff had disclosed it in its

application for insurance. Defendant avers that plaintiff did not disclose the existence of the

pollution condition in its application and therefore the pollution condition is excluded under the

policy.

Plaintiff’s complaint is silent as to whether responsible insureds knew of the pollution

condition and is further silent as to whether the pollution condition was disclosed in its

application for insurance with Chartis. The application for insurance is essential to resolution of

the issue of exclusion because if the pollution condition was disclosed, then Chartis cannot

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establish that the preexisting pollution condition exclusion applies. The application, however,

has not been made part of the record. Because defendant bears the burden of proving that the

exclusion is applicable, at this stage of the proceedings, defendant must do more than simply

allege that the plaintiff failed to disclose the existence of the pollution condition in its

application. Thus, at this point in time, the defendant has failed to establish that the exclusion

applies and therefore that plaintiff has failed to state a claim.

IV. Conclusion

For the foregoing reasons, defendant Chartis’ motion to dismiss is DENIED.

IT IS SO ORDERED.

S/ James L. Graham 

James L. Graham

UNITED STATES DISTRICT COURT

Date: Mar. 12, 2012

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